How it works
Near the top of Form 1040 the IRS asks whether, at any time during the year, you received, sold, exchanged, or otherwise disposed of a digital asset. Every filer must answer. Buying with dollars and holding can be answered no; receiving, selling, trading, spending, or earning crypto requires yes. The question also appears on business returns.
Why it matters
The return is signed under penalty of perjury. Answering no when the IRS holds a 1099-DA or summons data showing otherwise is a false statement, and it removes “I did not know” as a defense. A yes answer with correct reporting draws no special scrutiny.
Example
You sold 200 dollars of Dogecoin in March and otherwise held. The correct answer is yes, and the 200 dollar sale belongs on Form 8949 whether or not any exchange reported it.
Related: taxable event. Read more: the Form 1040 crypto question.
